Unemployment Scarring Effects: An Overview and Meta-analysis of Empirical Studies

This article reviews the empirical literature on the scarring effects of unemployment, by first presenting an overview of empirical evidence relating to the impact of unemployment spells on subsequent labor market outcomes and then exploiting meta-regression techniques. Empirical evidence is homogeneous in highlighting significant and often persistent wage losses and strong unemployment state dependence. This is confirmed by a meta-regression analysis under the assumption of a common true effect. Heterogeneous findings emerge in the literature, related to the magnitude of these detrimental effects, which are particularly penalizing in terms of labor earnings in case of unemployment periods experienced by laid-off workers. We shed light on further sources of heterogeneity and find that unemployment is particularly scarring for men and when studies’ identification strategy is based on selection on observables.